Shares of Baidu
Revenue climbed 60% to $189.6 million. Earnings soared 165% to $2.02 a share. Analysts figured that the company would earn just $1.50 a share on $180.1 million in revenue.
Better yet, the company is targeting $268.1 million to $274 million in revenue for the current quarter -- 67% to 70% ahead of last year's showing. Now that's accelerating sales growth! Analysts figured that revenue would only grow at a 49% clip, to $240.1 million, for the next quarter.
Frankly, I feel dumb now. I was cautious of the stock's valuation in light of its torrid run since Google
But I'll bet Credit Suisse's Wallace Cheung feels even dumber. The analyst had the guts to downgrade Baidu, just two days before its monster report. Who would do that? Baidu had blown past Wall Street estimates in each of the three previous quarters, so the chances were better than fair that it would make mincemeat out of the pros' models.
A report from Chinese online traffic-watcher Analysys International earlier this week also pointed to strong results for the search site. It showed that Baidu gained market share during the quarter not only at Google's expense, but also against smaller engines such as Sohu.com's
Search Site |
Q1 2010 |
Q4 2009 |
---|---|---|
Baidu |
64% |
58.4% |
|
30.9% |
35.6% |
Sogou |
0.7% |
1% |
Soso |
0.4% |
0.7% |
Others |
4% |
4.3% |
Source: Analysys International.
Who can stop Baidu now? Google's search engine retreated to Hong Kong. There's an opportunity for Microsoft's
I recommended shares of Baidu to Motley Fool Rule Breakers subscribers at $83.37 nearly four years ago. They're sitting pretty, but what about today's potential investors? Even if we look ahead to 2011's estimates, Baidu closed yesterday at a lofty 41 times next year's projected profitability.
That's not cheap, and now we have today's pop to factor into the price. However, keep in mind a few things:
- Earnings targets will likely head higher, the way they have with all of Baidu's beats.
- If recent history repeats, Baidu will land ahead of even the higher estimates.
Is Baidu cheap? No. However, it didn't seem conventionally cheap when I first singled it out at $83.37. Stocks that trade at deserved premiums remain expensive. Paying up for quality? What a concept!
Is Baidu overvalued? It is safe to buy into China these days? Share your thoughts in the comments box below.